An investor looks at an electronic board showing information about the shares of a brokerage house in Nanjing, Jiangsu Province, China.
Reuters
BEIJING – Mainland China’s stocks have fallen in recent days as authorities set a relatively low GDP target and signaled a move away from policies aimed at keeping the economy afloat in the wake of the coronavirus pandemic.
Shanghai composite material has fallen more than 5% in the last five trading days, with losses accelerating this week to the lowest rate since December, according to Wind Information. Other continental stock indices, such as the Star 50, which tracks the big names on the technology stock board, and the CSI 300 have fallen nearly 8% or more over the past five trading days.
Indices rose Wednesday after U.S. markets recovered from a recent sell-off overnight.
After major gains in the mainland Chinese stock market over the past six months, investors are focusing on two things, Tai Hui, JPMorgan Asset Management’s chief Asian market strategist, said on Wednesday.
One is concern about the decline of solidarity fiscal and monetary policy based on the comments of China’s annual parliamentary meeting; the other is selling in the U.S. market, particularly in high-tech tech stocks, he said.
Top officials from the People’s Bank of China and the banking regulator have warned this month about financial market risks. His comments join China’s biggest political event of the year, the “two-session” parliamentary meeting.
China sets “very conservative” GDP target
As part of the meeting, Chinese Premier Li Keqiang announced on Friday that the country would aim for GDP growth of more than 6% for the year, according to estimates by many economists. He told her that no new bonds would be issued to respond to the pandemic and that deficit and inflation targets would be lower than last year.
In a report Monday, Citi analysts called the GDP growth target “very conservative” and said it would ease pressure on policymakers to achieve rapid growth, allowing them to take stricter measures to contain risks in stocks and the real estate market.
As a result, they expect authorities to limit loan growth, restricting the potential amount of capital that could come to buy shares. Citi analysts estimate that the CSI 300 could fall 10% from its levels on Friday, March 5th.
The CSI 300 fell about 4% from the close on Friday at noon on Wednesday.
Chinese economists have been closely monitoring US markets, where government stimulus and increased U.S. Treasury yields to ten years have raised some concerns about the risks of “imported inflation.” To date, national measures of this price increase remain off. China recorded a 0.2% drop in the consumer price index in February compared to a year ago and a 1.7% increase in the producer price index.
Long-term investment issues
Instead, market strategists point to long-term opportunities for Chinese equities, given the recent sale and announcement of details of the country’s five-year development plan starting this year.
The development roadmap, known as the 14th Five-Year Plan, aims to increase China’s technological capabilities, increase the role of consumption in boosting economic growth, and address issues such as the aging Chinese population. .
Xuan Wei, chief strategist at China Asset Management, said in a note that in the medium to long term he is optimistic about investment opportunities in technology, consumer trends and medicine.